New norms likely for ultra mega power projects

Raja Awasthi, TNNSep 17, 2007, 04.53am IST

NEW DELHI: The second round of bidding for seven — out of nine — ultra-mega power projects (UMPP) is likely to be delayed by over three to four months. According to sources, the law ministry has written a letter to the power ministry to look into the rules of the bidding process.

The power ministry is now planning to bring about certain amendments in the bidding rules. Of the nine proposed plants, the government has already allocated Sasan ultra-mega power plant in Madhya Pradesh to Anil Ambani-promoted Reliance Energy Ltd, and Mundhra in Gujarat to the Tatas.

Despite problems cropping up in implementing UMPP, the ministry has estimated the private sector will pump in several billions over the next few years in mega power projects. "According to our estimates, ultra mega projects will bring in an investment of at least $15 billion, if not more, in the next five years. Yes, there have been some hurdles in implementing some of our projects, but considering the power deficit scenario, the private sector's involvement is the key to augment power generation," the source said.

The new rules will include the cancellation of a bid the moment a partner opts out of a consortium. The winning bidder will also need to have a dedicated coal mine for the project that it has won and won't be allowed to divert coal to any other project. The government also proposes not to allow the winning bidder to sell any portion of the land allocated by the government at a concessional rate, a government official said.

The Power Finance Corporation (PFC) is the nodal agency under the ministry of power to execute nine UMPPs in the country. If all the nine UMPPs come up, they should bring in an investment of whopping $31.5 billion — entailing an average investment of $3.5 billion for one such big project. However, some of these mega projects may remain non-starters for various reasons.

"New rules are being framed as the government wants 'foolproof' systems in place to prevent re-occurrence of the Sasan incident, where Globeleq-Lanco's bid for the Sasan project had to be declared null and void as the bidder misrepresented facts to win the project," a power ministry official said. In its bid to boost power generation and to meet power shortage in the country, the government has sought private participation for setting up nine ultra-mega power projects of 4,000 mw each in the country. The government plans to add 1,00,000 mw capacity during the Eleventh Five-Year Plan period.